5-Day Furniture violating rules

GILROY
– A large south Gilroy furniture warehouse store that’s drawn
close scrutiny from competitors is violating its business license
and can only remain open to the general public at its current
location for 12 days a year, City Administrator Jay Baksa has
decided.
GILROY – A large south Gilroy furniture warehouse store that’s drawn close scrutiny from competitors is violating its business license and can only remain open to the general public at its current location for 12 days a year, City Administrator Jay Baksa has decided.

Finding in favor of arguments made by his planning department, Baksa said in a written decision released this week that the 5-Day Furniture Warehouse at 500 E. Luchessa Ave. is functioning primarily as a retail business in violation of city regulations for that area.

“My thought is they can remain there and do their warehousing and storage and continue their wholesale sales, but if they want to go into retail business, they need to find a store in an appropriately zoned area,” Baksa said Monday.

But 5-Day co-owner Hai Tran promises to appeal the decision to the City Council, perhaps setting the stage for another lively Council debate about business competition and at least a situation where Councilmembers are forced to agree or disagree with their city administrator.

And it promises to get even more interesting. In another twist, Tran – who has said he’s being “harassed” by competitors – said Monday that 5-Day may end up supplying a new furniture and home interior store across the street from Rosso’s existing location in the area of Monterey and 10th streets.

“It’s on,” Tran said Monday.

At issue is whether the amount of retail traffic at the 162,000-0square-foot building crosses boundaries the city has established for businesses in that industrial zoning area, where warehousing and storage is permitted but retail is limited or banned.

City planners said they allowed some “ancillary” retail at the store when 5-Day applied for permission to operate. 5-Day representatives have said they were told retail could not exceed 25 percent of sales, although city officials debate that an actual percentage was issued.

But acting in his role as hearing officer for business license complaints, Baksa wrote in a decision released Friday that there’s “no question” that 5-Day Furniture is functioning primarily as a retail business.

5-Day Advertises as a retail store – calling itself “the region’s largest furniture store” – and its hours of operations are also consistent with other retail stores, he wrote.

And 5-Day’s retail sales far exceed its wholesale sales, Baksa said. January retail sales at the Gilroy location were roughly $206,000 against wholesale numbers of $110,000. In February, retail sales were roughly $128,000 while wholesale showed about $89,500.

“To use an old saying, ‘If it walks like a duck, it looks like a duck and it quacks like a duck, it must be a duck,’ ” Baksa wrote. “In this case, the 5-Day Furniture Warehouse is operating primarily as a retail operation … in violation of the city’s zoning ordinance. Therefore, it is in violation of its license.”

Baksa said the portion of the warehouse’s license that relates to its wholesale and storage business will be allowed to remain intact. And because the city allows a limited number of “ancillary” retail uses in industrial areas, Baksa said he would modify 5-Day’s license to allow for four three-day weekend “clearance” sales a year to occur at the Luchessa building.

The general public could only access the store during those sales, or else it would be in violation of its license.

The verdict is a rejection of 5-Day attorney Thomas Griffin’s argument last month that the Gilroy operation is but a small part of Pacific Century Furniture’s larger China-to-U.S. furniture wholesaling operation.

Griffin had argued 5-Day’s Gilroy operations are meant to liquidate excess inventory that 5-Day’s parent company has shipped to the United States from China, but cannot sell to usual large wholesale customers such as Macy’s because of market timing or other complications. In that sense, retail sales from the Gilroy operation were under 15 percent of the company’s estimated $1.2 million in gross business a month channeled through the West Coast, he said.

But that’s irrelevant, Baksa wrote, because the city must only identify what business is occurring at the Gilroy site.

“The (business) license authorizes the business to transact only the business licensed and only at that location within the city.”

Griffin said Tuesday that the city still misunderstands the business.

“I think the decision was based on a misunderstanding of the 5-Day business model and ignored all of the economic activity going through Gilroy other than the actual boxes going through the warehouse itself,” Griffin said. “We continue to remain hopeful the city will work with 5-Day so the necessary permits and zoning variations can occur and 5-Day can be a significant contributor to the economic well-being of Gilroy.”

At the hearing, Griffin also suggested several times that the complaints and city actions were being fueled by politically connected competitors. He made veiled references to Rosso’s Furniture, which is owned by Gilroy Unified School District trustee Jaime Rosso.

Rosso could not immediately be reached for comment before press time Tuesday on the verdict, but in the past store officials have said they want to ensure fairness and equity on the business playing field.

Rosso’s and other furniture stores could face more competition soon. While the appeal proceeds, Tran said 5-Day will likely supply a new gallery-style home furnishings store in the area near Rosso’s on south Monterey Road. A friend who already runs a store in San Jose is working with a landlord to open the new store, which Tran said will be a little more upscale.

“My buddy … doesn’t like to hear all this stuff, so he said ‘Let me come in and see what happens,’ ” Tran said. “They want it, they asked for it and we’re going to give it. We’re not going to give up.”